Following the resignation of James Runcie, U.S. Secretary of Education Betsy DeVos has been looking for someone to head the office of Federal Student Aid (FSA). The FSA is the largest provider of student loans in the country.
On June 20, 2017, DeVos finally chose Dr. A. Wayne Johnson, the CEO of a student loan company.
The move comes as the Department of Education looks to overhaul parts of the student loan system. This includes reviewing Public Service Loan Forgiveness and also consolidating income-driven repayment plans.
Who is A. Wayne Johnson?
Dr. A. Wayne Johnson is a veteran of the financial services industry. He is the President and CEO of Reunion Financial Services. He also helped found the company in 2012.
Reunion Financial Services originates, services, and refinances private student loans. Tapping Johnson keeps in line with the trend for business leaders as appointees in the Trump Administration.
Before founding Reunion Financial Services, Johnson formed BV Card Assets and sold it in 2012. Johnson also has a history as an executive with companies like First Data Corporation and Total System Services (TSYS). These companies deal with credit cards and payment systems technology.
In addition to being a business leader, Johnson has a Ph.D. in Higher Education Leadership from Mercer University. He also has an MBA from Emory University.
“Wayne is the right person to modernize FSA for the 21st Century,” Betsy DeVos said in the press release. “He actually wrote the book on student loan debt and will bring a unique combination of CEO-level operating skills and an in-depth understanding of the needs and issues associated with student loan borrowers and their families.”
How does A. Wayne Johnson view student loan debt?
DeVos bases her comments about Johnson on his Ph.D. dissertation, published in 2016. His dissertation focused on private student loan indebtedness and some of the points he made include:
- Student loan debt is a fact of life. Many students and parents accept that they will have to get student loans to pay for an education.
- Most people don’t understand the financial implications of student debt. The amount of debt students end up with surprises them. And so does the financial stress they feel when they finish.
- Borrowers don’t fully utilize federal loans. Often, borrowers take out private student loans without first utilizing federal loans. Johnson acknowledged federal loans usually have better repayment terms.
- Perception of financial aid officers is often negative. Borrowers believe that financial aid officers don’t fully let them know about consequences. No one told them about the large payments and potential life restrictions that come with student loan debt.
- Borrowers don’t have enough to evaluate their student loan options. Students feel like financial aid officers don’t offer them time to think about student loan options and the implications of their choices.
- Student loans are harmful. Borrowers have the perception that they have been harmed by student loans and that their future plans are negatively impacted by their student debt.
Johnson’s information tallies to some degree with reports that have come out recently, including one from the Consumer Financial Protection Bureau (CFPB) regarding how much information borrowers in default receive about affordable repayment plans.
Is everyone happy with Johnson as FSA head?
On the face of it, Johnson appears to be a solid choice, but some are skeptical of his corporate background.
Reuters reported that the group Allied Progress is less than impressed with his credentials, especially considering that there are more than 1,000 CFPB complaints again First Data, a company Johnson worked with. Allied Progress is worried that student loan defaults will increase under policies put in place by Johnson.
In the press release from the Department of Education, Johnson expressed the importance of the FSA, which serves 42 million student loan borrowers: “I have a profound appreciation for and recognition of the critical role FSA plays in advancing educational attainment by students in our nation’s institutions of higher education.”
He also affirmed a commitment to borrowers in the press release. But some advocates aren’t so sure.
Jay Fleischman, a student loan lawyer and consumer advocate, is one of those who isn’t sure this is the right move for consumers and borrowers.
“I wonder if this move is toward an end goal of getting the government out of student loan lending,” Fleischman said. “The federal government has programs in place that provides protections to borrowers that are needed.”
Fleischman said that student borrowers are restricted by their age and lack of experience in the world. “This [is] one of the areas where the federal government can do a better job,” he said. “These students need protections that private companies don’t provide. The government should be protecting student loan borrowers.”
Fleischman also went on to point out that, as an executive at TSYS, Johnson worked to collect debt. And, despite pointing out the better terms of federal loans in his dissertation, Johnson is currently the CEO of a company that makes private student loans and encourages moving away from federal student loans.
“It’s a further signal that the current administration has no intention of making things any easier for student loan borrowers. Period,” Fleischman said.
Do you have a student loan game plan?
In the past few months, the Department of Education has rolled backed Obama-era protections for student loan borrowers and has announced plans to grant an exclusive contract to a single student loan servicer.
Not only that, but the popular Public Service Loan Forgiveness program is on the chopping block. The Trump Administration budget proposal also includes raising the income cap on income-driven repayment from 10 percent to 12.5 percent. These are moves that have been met with dismay from student borrower advocates.
However, the proposal to consolidate income-driven plans and provide loan forgiveness after 15 years might be something that borrowers can get behind.
No matter what happens, though, now is the time to review your student loan options. Use student loan calculators to figure out which payment plan might be best for you. Consider refinancing to a lower interest rate and payment.
There’s a lot of change coming — so be ready. Take steps to pay down debt and grow your savings so that you’re prepared for whatever policies come next.
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